Replacing the Annual Performance
Appraisal Ritual
Presented by
Ronald J. Baker, CPA
HR12
4/3/2017
1:45 PM – 3:15 PM
The handouts and presentations attached are copyright and trademark
protected and provided for individual use only.
Ron Baker, Founder
VeraSage Institute
@ronaldbaker
Replacing the
Annual
Performance
Appraisal
Ritual
An Iatrogenic Disease?
•  More than 90% of
academic studies of
appraisals offer no
evidence of
effectiveness.
•  Yet, 97.2% of US
—and 91% of
worldwide—
companies use
them.
An Iatrogenic Disease?
“The fad of 360degree feedback
is supposedly
objective because
it’s anonymous.
So is hate mail.”
1
What about the law and firing employees?
•  Tom Coens labor lawyer––appraisals offer no
protection in court
•  Not required by law; “at will” employment
•  They’re not “legal backup” to avoid being sued
•  Most lawsuits are employees who get positive
comments
•  You can still document underperforming
employees for termination
•  You can fire anyone, anytime—not based on an
arbitrary annual date
“The dumbest
managerial
tool.”
An Iatrogenic Disease?
“Appraisal is not the
system that drives pay,
careers, and status; it is
an incidental effect of
those dynamic systems.
Appraisal is primarily
the paper-shuffling that
sanctifies decisions
already made.”
2
According to management research firm CEB,
95 percent of managers are dissatisfied with
performance reviews, and nearly 90 percent
of HR leaders say the process doesn’t even
yield accurate information.
According to management research firm CEB,
a company of 10,000 employees spends
roughly $35 million a year to conduct
reviews.
It’s not about saving money, it’s about return
on investment (ROI).
Companies that don’t do performance appraisals
• 
• 
• 
• 
• 
• 
• 
• 
• 
Accenture
Adobe
Deloitte
Gap
Medtronic
Microsoft
Netflix
P&G
6% of Fortune 500 companies, according to
management research firm CEB
3
Replacing the Annual Performance
Appraisal at Medtronic
1.  Eliminated ratings, 1-5
2.  Eliminated forced bell curve
3.  Instituted quarterly “performance
acceleration,” focuses on forwardlooking goals, has no numbers or
ratings, one-page summary
Replacing the Annual Performance
Appraisal at Accenture
1.  330,000 employees, eliminated
APAs September 1, 2015
2.  Eliminated rankings
3.  Eliminated once-a-year evaluations
4.  Instituted more “fluid” system,
feedback on an ongoing basis
Human Capital, Not Cattle
4
Thomas Sowell, Knowledge
and Decisions, 1996
“After all, the caveman had the same natural
resources at their disposal as we have today,
and the difference between their standard of
living and ours is a difference between the
knowledge they could bring to bear on those
resources and the knowledge used today.”
The World Bank: 2006 and 2010
How Knowledge Workers are Unique
•  They own the means of production
•  Firms need them more than they
need firms—balance has shifted
•  KWs have unique value, not jobs
•  Office is their servant, not their
master
•  Effectiveness is far more important
than efficiency
•  Judgments are more important than
measurements
•  Ultimately, they are volunteers
5
3 ways to allocate our time
Gary S. Becker,
Nobel-Prize
winning economist,
Human Capital
1.  Nonmarket time
2.  Investment time
3.  Labor market time
(Wealth =
Knowledge and
Growth =
Learning)
Knowledge-Worker Effectiveness––
Drucker
•  “What is the task?” (Definition, delegation,
deadline)
•  Autonomy (Greek for “self-governance”)
•  Continuing innovation
•  Continuous learning and teaching
•  Quality more important as quantity
•  Treated as Human Capital Investors
(volunteers)
Henry Ford, My Life and Work,
1923
Factory organization is not a device to prevent the
expansion of ability, but a device to reduce the waste
and losses due to mediocrity. It is not a device to
hinder the ambitious, clear-headed man from doing his
best, but a device to prevent the don’t-care sort of
individual from doing his worst.
6
Peter Drucker
“Performance can only be built on strengths. One
should waste as little effort as possible on improving
areas of low competence. And yet most organizations
concentrate on making incompetent performers into
mediocre ones. Energy, resources, and time should go
instead to making a competent person into a star
performer.”
Replacing the Performance
Appraisal
1.  Key Predictive Indicators for
Knowledge Workers
2.  Peter Drucker’s Manager’s Letter
3.  After-Action Reviews
According to management research firm CEB,
two-thirds of employees who receive the
highest scores in a typical performance
management system are not actually the
organization’s highest performers.
7
Knowledge Worker KPIs
• 
Marginal Contribution to Firm
Revenue/Value
• 
Customer Feedback
• 
Interpersonal skills
• 
Effective Listening Skills
• 
Effective Communication Skills
Knowledge Worker KPIs
• 
Continuous Learning & Coaching
Skills
• 
Effective Delegator
• 
Ability to Deal with Change
Knowledge Worker KPIs
• 
Number of Customer Contacts/Week
• 
Pride/Professionalism
• 
Passion
• 
HSDs
8
Peter Drucker’s
Manager’s Letter
Drucker’s Manager’s Letter
•  Twice a year
•  Define objectives of executive/you
•  What performance standards apply?
•  What must you do to obtain objectives?
•  What helps/hampers you?
•  What resources do you need?
•  Becomes the covenant
Peter Drucker’s Orchestra
•  What results have to be achieved to make a
difference?
•  How is the firm helping you to achieve your
professional goals and aspirations?
•  What does the firm do right and what
should it continue doing?
•  What are the firm’s weaknesses and what
should it stop doing?
9
Peter Drucker’s Orchestra
•  What critical things should the firm start
doing?
•  Why do you work here?
•  Does the firm deserve your loyalty?
Capturing Tacit
Knowledge: After Action
Reviews
AAR Questions
• 
• 
• 
• 
What was supposed to happen? (objectives)
What actually happened? (“ground truth”)
What were the positive and negative factors here?
What have we learned and how can we do better
next time?
10
Replacing the Annual Performance
Appraisal at Deloitte
1. 
65,000 employees, eliminated APAs
2. 
Previously, it spent 2 million hours a year
on performance reviews
3. 
Ratings might look “objective” but they are
very subjective
4. 
Our highest rated teams were all strengthbased
5. 
No cascading objectives, no 360-degree
feedback
Deloitte’s Three Objectives for
Performance Reviews
1. 
To recognize performance through variable
compensation (annual comp decision)
2. 
To see performance clearly (the quarterly or
per-project performance snapshot)
3. 
To fuel performance (weekly check-in with
team leader)
11
Revealed Preference: What would you
do, not what do you think?
1. 
Given what I know, I would award this
person the highest possible compensation
increase
2. 
I would always want him or her on my team
3. 
This person is at risk for low performance
4. 
This person is ready for promotion today
Knowledge Worker
Compensation Model
The Law of Compensation: the appraisal will
always support the recommended pay action
3 factors determine
pay:
1.  Want to retain
employee?
2.  Is a raise
necessary to do it?
3.  Firm’s budget.
12
Why People Work
•  Intrinsic Rewards—inherent in the work
itself. Purpose.
•  Opportunity to Grow—how will firm
enhance my intellectual capital?
•  Recognize Accomplishments—how does
firm celebrate successes?
•  Economic Rewards—composition of wages,
benefits.
Compensation Model
1. 
2. 
3. 
4. 
Salary
Profit-sharing
On-the-spot bonuses
Learning
Peter Drucker
“Appraisals were designed by the clinical and
abnormal psychologists for their own purposes. He
is legitimately concerned with what is wrong,
rather than with what is right with the patient…
therefore, very properly looks upon appraisals as a
process of diagnosing the weaknesses of a man.”
13
The Presenting Problem
What are you going to replace it
with?
Jody Thompson and
Cali Ressler
“You don’t look at a pile of laundry
and think, I’d better make sure I’m
putting enough hours into this.”
14
Steve Jobs
Apple
“It doesn’t make
sense to hire smart
people and then tell
them what to do; we
hire smart people so
they can tell us what
to do.”
Charles Handy, Myself and Other
More Important Matters
“Above all people know instinctively that there has to be trust
if any organization is going to work. …Yet organizations need
trust if they are not going to clutter themselves up with rules,
checks and checkers. Too much time is spent in organizations
making sure that what should have happened is happening. If
people know what they have to do and are competent to do it,
they should be left alone to get on with it.”
Charles Handy, Myself and Other
More Important Matters
“Go to the theater. Everyone is listed. They don’t talk
about human resources. Managers are reserved for
things, not people (stage manager, lighting manager).
They are directed, not managed, by someone who
leaves the scene once the project is underway.
Audience feedback, the people who matter, doesn’t
have to wait for annual performance appraisal.”
15
Peter Drucker
“If I had a son or daughter, would I be
willing to have him or her work for this
firm? If yes, why? If no, why?”
Additional Resources
• 
The corporate kabuki of performance
reviews
• 
In big move, Accenture will get rid of
annual performance reviews and
rankings
• 
Reinventing Performance
Management, HBR article on Deloitte
Thank You!
VeraSage website/blog
www.verasage.com
(707) 769-0965
www.thesoulofenterprise.com
Fridays, 1pm PT/4pm ET
[email protected]
Twitter @ronaldbaker
16
Some Disadvantages of Appraisals
•  More about maintaining control than fostering
responsibility
•  Boss takes responsibility for development
•  Counterproductive to driving out fear
•  Inhibits authentic communication
•  Encourages “sucking-up” behavior
•  Applies one-size-fits-all approach
•  Contains background “noise”: discipline,
termination, pay raise, bonus, promotions, etc.
•  Provides less and delayed feedback
Some Disadvantages of Appraisals
•  Ranking people does not help them perform better
•  HR focuses on 100% compliance, not conducting quality
reviews and effective communication
•  No clear focus on business purpose, strategic value, or
customer service
•  Filling out forms is not delivering effective feedback
•  7 good things, 3 bad things, not effective approach
•  Any acknowledgment of deficiencies will be used against
team member
•  Provides the illusion of control
•  Annual appraisal like dieting only on your birthday
wondering why you’re not losing weight
17
Your opinion matters!
Please take a moment
now to evaluate this
session.
REPLACING THE ANNUAL
PERFORMANCE APPRAISAL
RITUAL
RONALD J. BAKER
FOUNDER
VERASAGE INSTITUTE
Copyright © 2017
Ronald J. Baker
Note: Materials in this manual may not be reproduced
in any form without written permission.
Appraisal is not the system that drives pay, careers, and status; it is an incidental effect
of those dynamic systems. Appraisal is primarily the paper-shuffling that sanctifies
decisions already made.
––Tom Coens and Mary Jenkins, Abolishing Performance Appraisals
Human capital determines the performance capacity of any organization. Today’s
knowledge workers, unlike the factory workers of the Industrial Revolution, own the
means of production. Ultimately, knowledge workers are volunteers, since whether they
return to work is completely based on their volition.
Consequently, it is difficult to understand the continued reliance on the “annual agony”—
the performance-appraisal apparatus. Despite over 50 years of academic studies
uncovering scant empirical evidence of its effectiveness at actually improving
performance,1 firms cling to it in an uninformed belief that there is no suitable
replacement.
The price being paid is high [see Exhibit A]. It has become, to borrow a term from the
medical profession, an iatrogenic illness—that is, a disease caused by the doctor. An
estimated ten percent of all hospital patients suffer from this type of disease. As
professionals, we need to apply the Hippocratic principle of primum non nocere (“first,
do no harm”) to the performance appraisal process.
The Origins of Performance Appraisals
The modern antecedent of the appraisal process was explained by Peter Drucker in his
seminal book, The Effective Executive:
Appraisals, as they are now being used in the great
majority of organizations, were designed by the clinical and
abnormal psychologists for their own purposes. He is
legitimately concerned with what is wrong, rather than with
what is right with the patient. The clinical psychologist or
the abnormal psychologist, therefore, very properly looks
1TomCoensandMaryJenkins,AbolishingPerformanceAppraisals:WhyThey
BackfireandWhattoDoInstead.SanFrancisco,CA:Berrett-KoehlerPublishers,Inc.,
2000:18.
upon appraisals as a process of diagnosing the weaknesses
of a man.2
The appraisal tends to focus on weaknesses, not strengths—what psychologists call the
“presenting problem.” But good leaders—like good coaches—design performance
processes and tasks around a person’s strengths, and ignore—or make irrelevant—their
weaknesses.
What about the Law?
Two primary defenses for maintaining performance appraisals are that they are required
by law, and that they are required documentation to terminate an employee. Both
assertions are false. Most workers in the United States are employees at will; they can be
fired for any reason, or no reason at all, with or without warning. There are exceptions to
this doctrine, and they have grown over the years, yet there is no explicit legal reason to
perform performance appraisals.
Tom Coens, coauthor of the definitive book, Abolishing Performance Appraisals, is a
labor and employment lawyer with thirty years of experience. His book dispels the myths
surrounding the effectiveness of performance appraisals from a legal perspective:
Absent a contractual obligation, appraisals are not expressly required by laws
pertaining to discharge, and discrimination.
Yes, the employer can defend against wrongful discharge cases with appraisal
evidence, but employees can also use appraisals to their advantage. Employee
plaintiffs and union advocates routinely deploy appraisals to demonstrate that an
employee fired for incompetence or poor performance was, in fact, a good
employee.
Are you in business to defend lawsuits or to provide high-quality services and
products to your customers? Even without appraisal, you could orchestrate reams
of checklists for supervisors to fill out every week about each employee’s
productivity, errors, and deficiencies. Very likely this would give you plenty of
evidence to defend a lawsuit. At the same time, the impact of such monitoring
would send messages of distrust, engender fear, and undermine commitment.3
2PeterF.Drucker,TheEffectiveExecutive.NewYork:HarperBusiness,1993:83–84.
3TomCoensandMaryJenkins,AbolishingPerformanceAppraisals:WhyThey
BackfireandwhattodoInstead.SanFrancisco,CA:Berrett-KoehlerPublishers,Inc.,
2000:226;230;236.
Jay Shepherd is another unapologetic management-side lawyer who practiced for 17
years. In his indispensable book, Firing at Will: A Manager’s Guide, Jay explains why
he, too, is a critic of performance appraisals, labeling them “the dumbest managerial
tool,” and explains how they can actually hurt your chances in court:
I’ve seen this scenario happen more times than I can count: A company fires an
employee for poor performance. The employee, unhappy with that decision,
comes up with a reason to sue the company (usually some form of employment
discrimination). In its defense, the company insists that the employee’s
performance sucked and that the firing was legitimate.
Then in the discovery process of the lawsuit, the company turns over the
employee’s personnel file. And this is what the file looks like: A résumé. A
cover letter. An employee information sheet. A W-4. And three annual
performance appraisals filled with “satisfactory” and “meets expectations”
entries. In other words, not the sort of file that screams out “lousy employee.”
Now your documentation routine is actually hurting your chances in court.4
It is time to move to a model where courage is valued over caution, and command and
control is replaced with connect and cultivate. Ultimately, it is the intensity of
interactions with intelligent people, along with great ideas, that attracts and develops
talent—not the efficiency of a firm’s administrative processes.
Replacing the Performance Appraisal
Three strategic resources replace the performance appraisal system:
1. Key Predictive Indicators for Knowledge Workers
2. The Manager’s Letter
3. After-Action Reviews
Key Predictive Indicators for Knowledge Workers
A critical distinction is being made between a key performance indicator and a key
predictive indicator. The former is merely a measurement—such as the number of patents
filed, or new customers—but lacks a falsifiable theory. The latter, by contrast, is a
measurement, or judgment, guided by a theory, which can be tested and refined, in order
to explain, prescribe, or predict. It is the search for cause and effect.
4JayShepherd,FiringatWill:AManager’sGuide.NewYork:Apress,2011:104–05.
Knowledge work is not defined by quantity, but quality; not by its costs, but its results.
The traditional tools of measurement need to be replaced by judgment. And there is a
difference between a measurement and a judgment: a measurement requires only a scale;
a judgment requires wisdom. It is better to be approximately right rather than precisely
wrong.
So many firm leaders worry that if they get rid of objective measures, they will introduce
subjective bias into the decision-making process. So what? To get rid of bias we would
have to give up emotions and discernment, which is too high a price to pay. Neurologist
Antonio Damasio has studied brain-damaged patients, demonstrating that without
emotion it is impossible to make decisions.
Admittedly, the following KPIs raise rather than answer questions, but at least they raise
the right questions—such as What are the characteristics of becoming a successful CPA?
Better to be approximately relevant rather than precisely irrelevant. Enlightened firms
allow their team members to decide which of the following KPIs are most important to
track and develop.
Client Feedback
What are the customers saying—good and bad—about the team member? Would you
trade some efficiency for a team member who was absolutely loved by your customers?
How does the firm solicit feedback from its customers on team-member performance?
Effective Listening and Communication Skills
It is easier to teach listening and speaking, which are solitary undertakings, than to teach
listening and speaking, which always involve human interactions. But how do you
measure listening and communication skills?
I observed a panel discussion at the American Institute of Certified Public Accountant’s
Group 100 meeting of executives in corporations and government agencies that hire
CPAs, lawyers, and consultants. The number-one capability they look for—and it
influences their decision to hire one firm over another, even before price or quality—is
communication skills.
Risk Taking, Innovation, and Creativity
How often do employees take risks or innovate new ways of doing things for customers
or the firm? Do they engage in creative thinking in approaching their work? Google
allows its technical people 20 percent time to work on projects of their choice, resulting
in a myriad of innovative services for customers.
Knowledge Elicitation
Aristotle said, “Teaching is the highest form of understanding.” Knowledge elicitation is
the process of assisting others to generate their own knowledge. Note that this
encompasses more than simply learning new things; it involves educating others so that
they are able to generate their own knowledge. One of the most effective techniques for
knowledge workers to learn any subject—especially at a very deep level—is to teach it.
How often do the team members facilitate a “lunch and learn” about an article or book
they have read or seminar they have attended? How good are they at educating their
customers and colleagues?
Continuous Learning
What do team members know this year that they did not know last year that makes them
more valuable to the firm and its customers? This is more than simply logging hours in
educational courses; it would actually require an attempt to judge what they learned. How
many books have they read this year? More important, what did they learn from them?
Does the firm adequately invest in its people’s education to fulfill this mission?
One of the objections we hear to investing more in people’s education is “they will leave,
and possibly become an even stronger competitor.” This is no doubt true, although a firm
faces the risk of their leaving anyway. But what if you do not invest in their education
and they stay?
Effective Delegator
Peter Drucker believed that up to one-quarter of the demands on an executive’s time
could be consigned to the wastebasket without anyone noticing. Does your firm
encourage its knowledge workers to become effective delegators, as opposed to hoarding
work to meet irrelevant billable hour quotas?
Pride, Passion, Attitude, and Commitment
If you thought some of these other KPIs were hard to measure, how would you measure
pride? Although not a substitute for actual talent, pride in one’s work, customers,
colleagues, employer, and values are critical to operate with passion and commitment.
High-Satisfaction Day™
I am indebted to John Heymann, CEO, and his Team at NewLevel Group, a consulting
firm located in Napa, California, for this KPI. An HSD is one of those days that
convinces you, beyond doubt, why you do what you do. It could mean landing a new
customer, achieving a breakthrough on an existing project, or receiving a heartfelt thankyou from a customer. Sound touchy-feely? John admits that it is. But he also says that the
number of HSDs logged into the firm’s calendar is a leading indicator—and a
barometer—of his firm’s morale, culture, and profitability.
With the exception of technical and accounting skills, I defy anyone to objectively
measure the successful characteristics of a CPA; just like we can’t measure a doctor’s
beside manner—it has to be experienced. Efficiency metrics cannot count all the energy,
enthusiasm, and commitment that employees decide not to contribute.
The Manager’s Letter
Another practical suggestion to hold people accountable for their future contribution is
what Peter Drucker called the manager’s letter:
[Setting objectives] is so important that some of the most effective
managers I know go one step further. They have each of their subordinates
write a “manager’s letter” twice a year. In this letter to his superior, each
manager first defines the objectives of his superior’s job and of his own
job as he sees them. He then sets down the performance standards that he
believes are being applied to him. Next, he lists the things he must do
himself to attain these goals––and the things within his own unit he
considers the major obstacles. He lists the things his superior and the
company do that help him and the things that hamper him. Finally, he
outlines what he proposes to do during the next year to reach his goals. If
his superior accepts this statement, the “manager’s letter” becomes the
charter under which the manager operates.5
Procter & Gamble utilizes what it calls the Work and Development Plan, in lieu of
performance appraisals, which lays out the work to be achieved in the upcoming year,
how it links to the business plan, the measures and timing for success, and expected
results.
What makes the manager’s letter so valuable is its focus on opportunities, results, output,
and value, rather than problems, inputs, costs, and activities. Performance appraisals can
only report on the past, revealing problems, never opportunities [see Exhibit B].
5JohnE.Flaherty,PeterDrucker:ShapingtheManagerialMind.SanFrancisco:
Jossey-BassPublishers,1999:93.
After-Action Reviews (AARs)
The U.S. Army’s use of AARs began in 1973, not as a knowledge-management tool but
as a method to restore the values, integrity, and accountability that had diminished during
the Vietnam War.
Reflection without action is passive, but action without reflection is thoughtlessness.
Combine experience with reflection, and learning that lasts is the result. What percent of
your firm’s time is devoted to improving the work, not just doing the work?
The objective is not just to correct things, but to correct thinking, as the Army has learned
that flawed assumptions are the largest factor in flawed execution [see Exhibit C for a
sample AAR Agenda].
But perfectionist cultures, however, resist this type of candid introspection, as they tend
to be intolerant of errors, and they associate mistakes with career risk, not continuous
learning. The medical world has an appropriate axiom for mistakes made: forgive and
remember. AARs should not be used for promotions, salary increases, or performance
appraisals.
Confronting People with Their Freedom
You can’t keep on doing things the old way and still get the benefits of the new way.
––Thomas Sowell
Because knowledge workers are volunteers, we could learn a lot from the not-for-profit
sector. They know how to leverage people’s gifts, whereas performance appraisals are
more concerned with people’s weaknesses.
Management thinker Charles Handy has spent his career arguing that organizations are
living communities of individuals, not machines. He offers a splendid metaphor that I
believe is applicable to knowledge workers and the performance appraisal process:
Go to the theater. Everyone is listed. They don’t talk about human resources.
Managers are reserved for things, not people (stage manager, lighting manager).
They are directed, not managed, by someone who leaves the scene once the
project is underway. Audience feedback, the people who matter, doesn’t have to
wait for annual performance appraisal.6
6CharlesHandy,MyselfandOtherMoreImportantMatters.London:William
Heinemann,2006:188–89.
Author and consultant Peter Block says, “The real task of leadership is to confront people
with their freedom.” Performance appraisals, like timesheets, inhibit autonomy and
responsibility; they are the buggy-whip of the knowledge era—an example of yesterday
holding tomorrow hostage. Do we have the courage to replace such an ineffective
process?
Performance appraisals are, after all, an iatrogenic illness, which means: physician, heal
thyself.
Exhibit A: Deleterious Effects of Performance Appraisals
The following are some of the more serious negative effects of the performance appraisal
(PA):
Ø PAs are counterproductive to “driving out fear,” the one emotion that Dr.
Edwards Deming believed needed to be eliminated to improve human
performance;
Ø PAs focus on the weaknesses of the worker rather than his or her
strengths;
Ø Learning is overshadowed by the evaluation and judgment inherent in the
PA;
Ø Even if PAs convey both strengths and weaknesses, it is human nature for
negative feedback to drown out positive feedback;
Ø Effective feedback should occur as needed, not on an arbitrary date on a
calendar;
Ø PAs are a symbol of a paternalistic boss-subordinate relationship based on
command and control rather than the knowledge worker being responsible
for his or her own development;
Ø PAs impose a one-size-fits-all approach that impedes relevant, authentic
feedback to different individuals;
Ø Too much “noise” surrounds the PA process: discipline or termination,
pay raises, bonuses, promotions, and the like, lessening the focus on
performance improvement;
Ø Ranking people against each other does not help them do a better job.
Ranking people, also, by definition, creates “bottom performers,”
regardless of the absolute value of their work;
Ø PAs devote far too much scarce leadership attention to underperforming
employees rather than top performers;
Ø PAs are extremely costly to administer relative to their meager benefits;
Ø PAs provide no effective method for holding people accountable for future
results, since they focus on the past;
Ø Any self-acknowledged weakness by a team member can be used against
them, deterring learning and self-development;
Ø PAs confuse delivering effective feedback with filling out bureaucratic
forms and check-the-box administrative activities that have no connection
to strategic purpose or value creation;
Ø PAs reinforce a requirement for human-resources departments to keep
KGB-like dossiers on team members;
Ø PAs create a false impression that a scientific and objective process is
being applied to measure individual performance. Yet all PAs, in the final
analysis, are subjective and based on judgment;
Ø PAs obscure the fact that a firm is an interdependent system, and what
matters is the performance of the whole, which is not merely the sum of its
components;
Ø PAs provide the illusion of protection from lawsuits and allegations of
wrongful termination, when in fact they rarely offer that protection—and
often backfire in litigation.
Ø According to author Daniel Pink, “Performance reviews are rarely
authentic conversations. More often, they are the West’s form of kabuki
theatre—highly stylized rituals in which people recite predictable lines in
a formulaic way and hope the experience ends very quickly.”7
7DanielPink,“ThinkTank:Fixtheworkplace,nottheworkers.”TheTelegraph,
November6,2010,http://www.telegraph.co.uk/finance/jobs/8113600/ThinkTank-Fix-the-workplace-not-the-workers.html.
Exhibit B: Questions for Constructing a Manager’s Letter
Peter Drucker, who coined the term knowledge worker in 1957, believed the main focus
needs to be on the task to be done—with all other distractions eliminated as much as
possible—and this is defined by the individual workers themselves. Ultimately, all
development is self-development, with the knowledge worker being responsible for his or
her own performance. The following issues show what might be included in a manager’s
letter:
Ø What is your task?
Ø What should it be?
Ø What should you be expected to contribute?
Ø How fair are those expectations?
Ø What hampers you in doing your task and should be eliminated?
Ø How could you make the greatest contribution with your strengths, your way of
performing, and your values to what needs to be done?
Ø What results have to be achieved to make a difference?
Ø What hinders you in doing your task and should be eliminated?
Ø What progress are you making in your career?
Ø How is the firm helping you to achieve your professional goals and aspirations?
Ø What does the firm do right and what should it continue doing?
Ø What are the firm’s weaknesses and what should it stop doing?
Ø What critical things should the firm start doing?
These questions will enable the firm and the employee to focus resources and attention on
external opportunities, rather than internal bureaucratic procedures, rules, and systems.
Exhibit C: Sample AAR Agenda
Date:12/31/20119:00AM
Clickhereandenterlocationofmeeting
Facilitator
Clickhereandenterfacilitatorname
Scribe
Clickhereandenterscribename
Requestedattendees
Resources
Recordingdevice
Pleasebring
Atleastthreethingsthatyouthinkwentwellandthreethingsthatyou
thinkcouldhavegonebetter.
Objectives
Dialogueleader
Introductions
Reviewafteractionreviewgroundrules
5
Whatweretheobjectives?
2
Whatactuallyhappenedandwhywasitdifferent?
30
Whatarewegoingtododifferentnexttime?
10
Eachpersonshouldratethesuccessoftheengagement
5
•
Forlearning,notcriticism–-absolutelynopersonal
attacks
•
Nohierarchyexists
•
Facilitatorandscribemustbedifferentpeople
•
Donotoveranalyze;stayatahighlevel
•
Whatwentwell?
•
Whydidthesethingsgowell?
•
Whatcouldhavegonebetter?
•
Whydidthesethingsgowrong?
Maximum
time
3
Whatarethespecificfollow-upitems?
5
OtherInformation
Pleasebeprompt.Thankyouforyourattendance.
AICPA Resources
Private Companies Practice Section Human Capital Center
Other Resources
Because all good humor contains an element of truth, this clip from the UK
version of the TV show The Office is a good companion to this article:
http://www.youtube.com/watch?v=I9LLZJFBWdc
Bibliography
TheEffectiveExecutive,PeterF.Drucker,NewYork:HarperBusiness,1993
PeterDrucker:ShapingtheManagerialMind,JohnE.Flaherty,SanFrancisco:JosseyBassPublishers,1999
AbolishingPerformanceAppraisals:WhyTheyBackfireandWhattoDoInstead,Tom
CoensandMaryJenkins,SanFrancisco,CA:Berrett-KoehlerPublishers,Inc.,2000
MeasureWhatMatterstoCustomers:UsingKeyPredictiveIndicators,RonaldJ.Baker,
Hoboken,NJ:JohnWiley&Sons,Inc.,2006
MyselfandOtherMoreImportantMatters,CharlesHandy,London:William
Heinemann,2006
MindOverMatter:WhyIntellectualCapitalistheChiefSourceofWealth,RonaldJ.
Baker,Hoboken,NJ:JohnWiley&Sons,Inc.,2008
GetRidofthePerformanceReview!HowCompaniesCanStopIntimidating,Start
Managing—andFocusonWhatReallyMatters,SamuelA.CulbertwithLawrence
Rout,NewYork:BusinessPlus,2010
ImplementingValuePricing:ARadicalBusinessModelforProfessionalFirms,Ronald
J.Baker,Hoboken,NJ:JohnWiley&Sons,Inc.,2011
TheSoulofEnterprise:DialoguesonBusinessintheKnowledgeEconomy.RonaldJ.
BakerandEdKless,VeraSagePress,2015.
FiringatWill:AManager’sGuide,JayShepherd,NewYork:Apress,2011
Ronald J. Baker
Ronald J. Baker started his CPA career in 1984 with KPMG’s Private
Business Advisory Services in San Francisco. Today, he is the founder of
VeraSage Institute—the leading think tank dedicated to educating
professionals internationally—and a radio talk-show host on the
www.VoiceAmerica.com show: The Soul of Enterprise: Business in the
Knowledge Economy.
As a frequent speaker, writer, and educator, his work takes him around the world.
He has been an instructor with the California CPA Education Foundation since
1995 and has authored fifteen courses for them, including: You Are What You
Charge For: Success in Today’s Emerging Experience Economy (with Daniel
Morris); Alternatives to the Federal Income Tax; Trashing the Timesheet: A
Declaration of Independence; Everyday Economics; Everyday Ethics: Doing Well
by Doing Good; and The Best Business Books You Should Read.
He is the author of seven books, including: Professional’s Guide to Value Pricing;
The Firm of the Future: A Guide for Accountants, Lawyers, and Other
Professional Services, co-authored with Paul Dunn; Pricing on Purpose: Creating
and Capturing Value; Measure What Matters to Customers: Using Key Predictive
Indicators; Mind Over Matter: Why Intellectual Capital is the Chief Source of
Wealth; Implementing Value Pricing: A Radical Business Model for Professional
Firms; and his latest book The Soul of Enterprise: Dialogues on Business in the
Knowledge Economy, co-authored with Ed Kless.
Ron has toured the world, spreading his value-pricing message to over 150,000
professionals. He has been appointed to the American Institute of Certified Public
Accountant’s Group of One Hundred, a think tank of leaders to address the future
of the profession; named on Accounting Today’s 2001, 2002, 2003, 2004, 2005,
2006, 2007, 2011, 2012, 2013, 2014, 2015, and 2016 Top 100 Most Influential
People in the profession; voted number three, six, and nine, of the Top ten Most
Influential People in the profession in 2012, 2013, 2014, 2015, and 2016;
selected as one of LinkedIn’s Influencer Bloggers; and received the 2003 Award
for Instructor Excellence from the California CPA Education Foundation. He
graduated in 1984 from San Francisco State University, with a Bachelor of
Science in accounting and a minor in economics. He is a graduate of Disney
University and Cato University, and is a faculty member of the Professional
Pricing Society. He presently resides in Petaluma, California.
To contact Ron Baker:
VeraSage Institute
E-mail: [email protected]
Website/Blog: www.verasage.com and www.thesoulofenterprise.com
Follow on LinkedIn: http://linkd.in/SAG3IF
Twitter @ronaldbaker